Is the output gap a useful indicator of inflation?

Iris Claus ()

No DP2000/05, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: One of the main indicators of inflationary pressures used by the Reserve Bank of New Zealand is the output gap. The output gap is not directly observable and estimates have to be inferred from the data. This paper evaluates whether the output gap, however measured, is a good indicator of inflationary pressures in New Zealand. The results suggest that the output gap provides a useful signal to the monetary authority. When the output gap is positive (negative) two times out of three inflation will increase (decrease) in the next quarter and three times out of five it will increase (decrease) the following year.

JEL-codes: C32 E31 (search for similar items in EconPapers)
Pages: 21p
Date: 2000-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2000/05

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